PRINCETON — An incinerator that was at the former University Medical Center hospital site that is being turned into the AvalonBay housing development raised concerns of residents and officials during a presentation on the developer’s agreement at tonight’s council meeting.

Representatives of the AvalonBay housing development said tonight that the developer is reviewing the incinerator area as well as records to ensure that it wasn’t used to dispose of hazardous waste.

Jon Vogel, vice president of development for AvalonBay, said the developer worked with former officials at the hospital to determine what the incinerator, which has not been in operation for more than 20 years, was used for, relying on officials who worked at the building decades ago.

Those officials said it was used to burn medical records only, Vogel said. The incinerator is no longer located on the site, he said.

AvalonBay’s plan would turn the former hospital site on Witherspoon Street into a complex with two apartment buildings and three buildings of four townhouse units each. The apartment buildings would include 56 affordable housing units, with half allocated for moderate income families, 37 percent for low-income and 13 percent for very low income families.

Some residents questioned whether Princeton should hire its own independent specialist to assess the site and determine whether the site’s soil could be contaminated.

“We’re not relying on the hospital’s statement that it was only medical records being burned,” Vogel replied. “That’s why we’re looking for drain breaks and soil contamination because we think something else might be there. I want to be very emphatic about that.”

Officials will be videotaping the review of the incinerator room as a part of the agreement, they said.

After some discussion, council unanimously passed a resolution to authorize the hiring of a licensed site remediation professional to make sure the public’s safety is being protected, not to exceed $5,000.

“The same residents raising these concerns are in litigation with us,” Vogel said, referring to ongoing litigation over AvalonBay’s development of the site.

“They’re really just trying to stop this project,” Vogel said, and with that, a resident in the audience screamed, “Hey, we’re residents, pal!”

There will also be a dust monitor on site to monitor contaminants through the demolition process. Dust monitoring will be performed on-site during the asbestos abatement process, and water will be sprayed over the property so as not to create airborne dust, officials said. There will also be noise monitors on site to monitor the noise levels experienced by residents nearby.

On a separate issue, Scott Sillars of the Citizens Finance Advisory Committee presented a financial policy outlining how the municipality should manage its budget surplus after a year of consolidation.

About 15 percent of the budget — about $16 million — is dedicated to surplus, which rolls over from year to year, officials said. Sillars discussed the possibilities of spending down the surplus, trying to maintain it at a slightly lower level and the implications of the different choices.

Resident Peter Marks questioned whether the municipality was reserving too much surplus just to uphold its AAA rating, he said.

“The surplus is great if it makes it easy for council to spend money. For the town to have triple-A rating might not be the end-all, be-all,” Marks said. “It seems to me today and for several years that we’re reserving great more than we need to reserve. People in town have to pay a good deal more than they might otherwise want to pay. Ask yourselves whether that’s the position you want to put us in.”

Mayor Liz Lempert said having a healthy surplus is necessary because emergency or urgent situations could arise that require tapping into the surplus.

“Partly, it’s there as a rainy day fund so that you don’t run into a situation where if your surplus is too low, then you have to raise taxes,” she said. “If you have a small margin, then your tax rate is going up and down every year and you don’t have stability.”

“We need to continue to budget conservatively in a fashion that’s consistent with our triple-A rating,” Sillars said. “If you fail to manage all elements of a budget, it could result in poor decision-making, inappropriately increasing or decreasing the tax rate, poor spending decisions, and could lead to the loss of sustainability.”

The surplus is on target to increase by $1 million more this year, Sillars said.

“We never know what’s going to happen,” Lempert said, defending the current surplus level. “We don’t know if we’re going to have a Hurricane Sandy; we don’t know if we’re going to be — hopefully not — faced with litigation costs or other things that we don’t know.”

The intention of reviewing a surplus policy is to create more transparency in the budgeting process and make for good planning on the government’s part, Lempert said. Council also will review a financial debt policy at its next meeting on Feb. 17 and then adopt both policies shortly thereafter as part of the town’s budgeting process for this year, Lempert said.